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Guzman Inc. operates the Home Appliance Division as a profit center. Operating data for this division for the year ended December 31, 2017, are shown

Guzman Inc. operates the Home Appliance Division as a profit center. Operating data for this division for the year ended December 31, 2017, are shown on the next page.

Budget

Difference from Budget

Sales

$2,400,000

$90,000 U

Cost of goods sold

Variable

1,200,000

58,000 U

Controllable fixed

200,000

8,000 F

Selling and administrative

Variable

240,000

8,000 F

Controllable fixed

60,000

3,000 U

Noncontrollable fixed costs

50,000

2,000 U

In addition, Guzman incurs $150,000 of indirect fixed costs that were budgeted at $155,000. Twenty percent (20%) of these costs are allocated to the Home Appliance Division. None of these costs are controllable by the division manager.

Instructions

(a) Prepare a responsibility report for the Home Appliance Division (a profit center) for the year.

(b) Comment on the managers performance in controlling revenues and costs.

(c) Identify any costs excluded from the responsibility report and explain why they were excluded.

(a) Responsibility Report

For the Year Ended December 31, 2017

Budget

Actual

Favorable F

Unfavorable U

Sales

2,400,000

2,310,000

90,000 U

Variable Costs:

Total

Contribution Margin

Controllable Fixed Costs:

Total

Controllable Margin

(b) Two costs are excluded from the report are:

(1) _____________________________________

(2) _____________________________________

The reason that they are excluded is: ____________________________________________

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